No. 125 Brgy.

San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

SUBSEQUENT TO THE DATE OF BUSINESS COMBINATION INCLUDING

INTERCOMPANY SALE OF INVENTORY AND PROPERTY, PLANT & EQUIPMENT

Use the following information for questions 1-5

Psalm Corporation acquired 75% of the outstanding ordinary shares of Selah Company on
January 2, 2034 for P574,800 excluding control premium of P40,000. Selah Company’s
stockholders’ equity on January 2, 2034 were as follows: Ordinary shares, P100 par, P262,500
; Share premium, P105,000 ; Retained earnings , P210,000. Non-controlling interest is measured
on January 2, 2034 at fair value. The fair value of the non-controlling interest amount to P180,000.
Current fair value of Selah Company’s identifiable net assets exceeded their book values as
follows: Inventories, P31,500 (1/3 were sold in 2034); Plant assets (economic life of 10 years),
P52,500 ; while the book value of Patents exceeded their fair value (economic life of 5 years),
P21,500. Both Psalm Corporation and Selah Company include depreciation expense and
amortization in operating expenses. Both companies use the straight-line method for depreciation
and amortization. Impairment of goodwill amounting to P12,000 in year 2034 is to be recognized.
Prior to acquisition the ordinary shares of P Corporation are P360,000, Share premium is
P150,000 and Retained Earnings is P300,000. For the year ended December 31, 2034, P
Company and S Company reported a net income of P356,000 and P204,000 respectively and
Dividend declaration of P30,000 and P10,000 respectively.
1. How much is the Non-controlling interest in net income?
2. How much is the Non-controlling interest in net assets?
3. How much is the Consolidated net income attributable to parent?
4. How much is the Consolidated retained earnings attributable to parent?
5. How much is the Consolidated stockholders’ equity?

Use the following information for the next question

PPP Company purchased 75% of the capital stock of SSS Company on December 31, 2029 at
P1,050,000 more the book value of its net assets. The excess was allocated to equipment in the
amount of P468,750 and to goodwill for the balance. The equipment has an estimated useful life
of 10 years and goodwill was not impaired. For four years SSS Company reported cumulative
earnings of P4,725,000 and paid P1,364,000 in dividends. On January 2, 2034, non-controlling
interest in net asset of SSS Company amounts to P1,968,750.

6. Assuming Non-controlling interest is measured at fair value, what is the price

paid by PPP Company on the date of acquisition?
A. P4,436,250
B. P3,504,375
C. P3,526,875
D. P4,200,000

1|P a g e RFERRER/RLACO/ATANG/DEJESUS
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

Use the following information for the next four questions

V1 Company purchased 70% ownership of Q4 Company on January 1, 2030, at underlying book
value. While each company has its own sales forces and independent product lines, there are
substantial inter-corporate sales of inventory each period. The following inter-corporate sales
occurred during 2031 and 2032:

Cost of Sales Unsold at Year Sold

Year Seller Product Sold Buyer Price End of Year to Outsiders
2031 V1 Co. P896,000 Q4 Co. P1,280,000 P280,000 2032
2032 Q4 Co. P624,000 V1 Co. P960,000 P154,000 2033
2032 V1 Co. P700,000 Q4 Co. P875,000 P126,000 2033
The following data summarized the results of their financial operations for the year ended,
December 31, 2032:

V1 Company Q4 Company
Sales P7,700,000 P3,360,000
Gross Profit 3,808,000 1,008,000
Operating Expenses 1,540,000 560,000
Ending Inventories 672,000 560,000
Dividend Received from affiliate 252,000 -
Dividend Received from non-affiliate - 140,000

6. How much is the Consolidated sales at the end of 2032?

a. P9,625,500
b. P9,425,500
c. P9,225,000
d. P11,060,000

7. How much is the Consolidated cost of goods sold at the end of 2032?

a. P4,915,100
b. P4,413,900
c. P4,404,100
d. P4,406,100

8. How much is the consolidated net income attributable to parent’s shareholders equity
at the end of 2032?

a. P2,602,670
b. P2,952,670
c. P2,950,670
d. P2,700,670

9. How much is the non-controlling interest in net income at the end of 2032?

a. P118,230
b. P120,000
c. P162,230
d. P160,230

2|P a g e RFERRER/RLACO/ATANG/DEJESUS
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

Use the following information for the next two questions

A summary of the separate income statement of Y2K Corporation and its 75% owned subsidiary,
W7M Company, for 2031were as follows:

Y2K W7M
Sales P18,000,000 P10,800,000
Gain on sale of equipment 360,000 ------------
Cost of goods sold (7,200,000) (4,680,000)
Depreciation expense (1,800,000) (1,080,000)
Other expenses (2,880,000) (1,440,000)
Income from operations P6,480,000 P3,600,000

There was an upstream sale of equipment with a book value of P1,440,000 for P2,340,000 on
January 2, 2029. At the time of the intercompany sale, the equipment had a remaining useful life
of five years. Y2K uses straight-line depreciation. The buying affiliate used the equipment until
December 31, 2031, at which time it was sold to M5Y for P1,296,000.

10. How much is the realized gain at the end of 2031?

a. P90,000
b. P180,000
c. P540,000
d. P360,000

11. What is the amount of net profit attributable to non-controlling interests for 2031?

A. P1,035,000
B. P945,000
C. P900,000
D. P1,125,00

Use the following information for the next two questions

On January 1, 2031, PPP Company acquired 90% of ordinary shares of SSS Inc. at a price of
P27,000,000. On this date, the total assets of SSS Inc. amounted to P60,520,000 with total
liabilities of P30,000,000. All the assets and liabilities of SSS Inc. are fairly valued except for a
(10% annual interest) loan payable with face value of P10,000,000 that has fair value of
P9,520,000 with effective interest rate of 12%. On January 1, 2031, the remaining term of this
loan payable is 3 years. On July 1, 2031, SSS Inc. granted P2,000,000 (20%) notes payable to
PPP Company with a term of 2 years. For the year ended December 31, 2031, PPP Company
reported P2,000,000 net income in its separate income statement while SSS Inc. reported net
income of P1,000,000 in its separate income statement. On December 31, 2031, PPP Company
and SSS Inc. declared dividends in the amount of P1,000,000 and P500,000, respectively. PPP
accounted for its Investment in SSS Inc. using cost method in its separate financial statements.

12. What is the consolidated net income attributable to parent’s stockholders to be

reported by PPP Company in its consolidated statement of comprehensive income
for the year ended December 31, 2031?
a. P3,241,840
b. P3,226,000
c. P3,041,840
d. P3,498,160

13. What is the noncontrolling interest in net income to be reported by PPP Company in
its consolidated statement of comprehensive income for the year ended December
31, 2031?
a. P65,760
b. P64,000
c. P84,000
d. P94,240

3|P a g e RFERRER/RLACO/ATANG/DEJESUS
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

Use the following information for the next two questions

On January 1, 2028, Entity AAA acquired 90% of outstanding ordinary shares of Entity BBB . On
July 1, 2028, Entity AAA purchased 80% of outstanding ordinary shares of Entity CCC . Entity
AAA, Entity BBB and Entity CCC reported the following sales and cost of goods sold for the
years ended December 31, 2029 and December 31, 2030:
Entity AAA Entity BBB Entity CCC
2029 Sales P5,000,000 P3,000,000 P2,000,000
2029 Cost of Sales 3,000,000 2,100,000 1,600,000

2030 Sales P6,000,000 P4,000,000 P3,000,000

2030 Cost of Sales 4,200,000 3,200,000 1,800,000

The following intercompany sales of goods involving different set of inventories occurred during
2029 and 2030:
 During 2029, Entity CCC sold inventory to Entity AAA at a price of P200,000. ¼
of those inventories were resold by Entity AAA to third persons during 2029 while
the remainders were resold to third persons during 2030.
 During 2029, Entity BBB sold inventory to Entity CCC at a price of P300,000. 1/3
of those inventories were resold by Entity CCC to third persons during 2029 while
the remainders were resold to third persons during 2030.
 During 2030, Entity CCC sold inventory to Entity BBB at a price of P400,000. 1/5
of those inventories remained in the ending inventory of Entity BBB at the end of
December 31, 2030.
 During 2030, Entity AAA sold inventory to entity BBB at a price of P500,000. 2/5
of those inventories were resold by Entity BBB to third persons during 2030.

14. What is the consolidated sales to be reported by Entity AAA in its Consolidated
Statement of Comprehensive Income for the year ended December 31, 2030?
a. P12,500,000
b. P12,600,000
c. P12,100,000
d. P11,600,000

15. What is the consolidated cost of sales to be reported by Entity AAA in its
Consolidated Statement of Comprehensive Income for the year ended December
31, 2030?
a. P8,302,000
b. P8,912,000
c. P8,532,000
d. P8,652,000

Use the following information for the next two questions

SM Holdings Inc. owns 90% of ordinary shares of SM Prime Inc., a company whose shares of
stocks are publicly traded in Philippine Stock Exchange. SM Prime Inc., owns 80% of ordinary
shares of SM Cinema Inc. The chief accountants of the aforementioned corporations record and
recognize all dividends received from different companies as dividend income. The parent
corporations use cost method in their separate financial statements in accounting for their
respective investment in subsidiaries. For the year ended December 31, 2030, the following data
are obtained from the accounting records of the three corporations concerning its dividends:
SM Holdings Inc. SM Prime Inc. SM Cinema Inc.
Dividends Declared P2,000,000 P1,000,000 P500,000
during the year
Reported Dividend P1,500,000 P1,200,000 P800,000
Income during the
year
Dividends received P200,000 P? P500,000
from Associate
during the year
Dividends received P? P100,000 P?
from Fair Value
Investments during
the year

16. What is the dividend income to be presented for the year ended December 31, 2030
in the respective Consolidated Statement of Comprehensive Income of SM Prime?
a. P400,000

4|P a g e RFERRER/RLACO/ATANG/DEJESUS
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

b. P300,000
c. P450,000
d. P500,000

17. What is the dividend income to be presented for the year ended December 31, 2030
in the Consolidated Statement of Comprehensive of SM Holdings Inc.?
e. P800,000
f. P500,000
g. P550,000
h. P900,000

Use the following information for the next two questions

On January 1, 2030, ICARE Company purchased 70% of ordinary shares of CPA Company at a
price of P3,000,000. On January 1, 2030, ICARE reported retained earnings in the amount of
P10,000,0 00. As of this date, the total assets of CPA Company is P6,500,000 while its total
liabilities amounted to P1,000,000. All of the assets and liabilities of CPA are properly valued
except for a building with book value of P1,500,000 and fair value of P1,000,000. The building
has remaining life of 10 years. On April 1, 2030, ICARE sold inventories at a price of P200,000 to
CPA with gross profit rate of 25% based on cost. On July 1, 2030, CPA sold a machinery to
ICARE at a price of P880,000 when its book value is still P1,000,000 on this date. As of this date,
the said machinery has remaining life of 3 years. As of December 31, 2030, CPA has resold to
its customers 40% of inventories coming from ICARE. For the year ended December 31, 2030,
the two companies reported the following information:
ICARE Company CPA Company
2030 Net Income P4,000,000 P2,000,000
2030 Dividends Declared P1,500,000 P500,000

18. What is the consolidated retained earnings in ICARE’s Consolidated Statement of

Financial Position on December 31, 2030?
a. P14,139,000
b. P14,481,000
a. P13,631,000
c. P14,131,000

19. Using the same data in number 19, what is the noncontrolling interest in net assets
to be reported in ICARE’s Consolidated Statement of Financial Position?
a. P1,995,000
b. P1,905,000
c. P1,971,000
d. P1,405,000

-END-

5|P a g e RFERRER/RLACO/ATANG/DEJESUS